GARDEN BIO-CHEM(300401) 华西证券·2024-06-27 13:12Investment Rating - The report gives a "Buy" rating to the company, predicting that the stock price will outperform the Shanghai Composite Index by 15% or more within the next 6 months [153] Core Views - The company is a global leader in Vitamin D3 (VD3) production, with a comprehensive vertical integration strategy that strengthens its core advantages in the VD3 industry [1][5][6] - The VD3 industry is expected to enter a new upward price cycle, driven by supply-side factors, and the company is well-positioned to benefit from this trend [12][116] - The company's "One Vertical, One Horizontal" strategy aims to deepen its vertical integration in the VD3 industry while expanding horizontally into other vitamin categories, which is expected to drive future growth [14][69][85] Industry Overview - VD3 is widely used in feed, food, and pharmaceutical industries, with feed accounting for 90% of the downstream demand structure [40][62] - The global VD3 demand in 2022 is estimated at 9,405 tons, with feed, food, and pharmaceutical sectors contributing 7,596 tons, 349 tons, and 1,460 tons respectively [2][42][131] - The VD3 industry is highly concentrated, with the company holding a leading position due to its integrated upstream advantages, production capacity, and cost efficiency [6][135] Company Strengths - The company has a significant cost advantage due to its proprietary molecular distillation technology, which results in higher product quality, lower production costs, and less environmental pollution compared to competitors [5] - With a production capacity of 840 tons of NF-grade cholesterol, the company has the largest global capacity, giving it a strong competitive edge in the VD3 market [135] - The company has long-term cooperation agreements with DSM for cholesterol, 25-hydroxy VD3, and 7-dehydrocholesterol, which enhances its market share and international presence [144][145] Growth Drivers - The company is expanding its product portfolio to include high-value-added products such as 25-hydroxy VD3, which has the potential to replace traditional VD3 in the long term due to its higher biological activity and efficiency [117][118] - The company is also entering the pharmaceutical sector through the acquisition of Garden Pharmaceutical, focusing on high-end generic drug development and expanding its product line [25][93][96] - The company is diversifying into other vitamin categories, including Vitamin A, E, B6, and biotin, which is expected to drive future growth and reduce reliance on a single product line [69][70] Financial Performance - The company's revenue is expected to grow from 1,421 million CNY in 2024 to 2,228 million CNY in 2026, with a CAGR of 25.3% [146] - The company's net profit is projected to increase from 364 million CNY in 2024 to 564 million CNY in 2026, driven by the expected recovery in VD3 prices and the expansion of high-value-added products [146] - The company's gross margin is expected to improve from 59.9% in 2023 to 62.8% in 2026, reflecting its cost advantages and the shift towards higher-margin products [146] Risks - The company's performance is highly sensitive to fluctuations in VD3 prices, which could negatively impact its profitability if prices decline [138] - The success of the company's new projects, such as the expansion into high-end generic drugs and new vitamin categories, is subject to uncertainties in market demand and execution risks [138]